Mortgage Q & A
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Q: What effect does a change in my financial situation have if my loan is already approved but has not closed?
A. Once you have your mortgage you should not make any substantial changes to your situation without first consulting your loan officer. Any material change after loan approval may directly affect your debt-to-income ratio, possibly jeopardizing your loan status. Additional debts like buying new furniture, a boat, a new car, or changing jobs could cause a disaster to your new home plan. Don’t do anything (until after closing) without talking to your lender or your new car may be parked at your apartment and not in your new garage!
Q. I am selling my house to purchase a new one. My buyers have just moved to town with their new jobs, I was told to make sure they were qualified. Is this necessary even though they have used a Realtor and have signed the contract?
A. Absolutely! Unfortunately, there have been horror stories where sellers have lost the opportunity to purchase their new homes due to their buyers not being properly qualified. One buyer or seller not following through on the contract can start a chain reaction that could cause many to suffer. Most lenders should offer letters of qualification showing that they have met with the clients and have deemed them qualified to borrow “$XXX” amount toward the purchase of a new home.
Q. I’ve met with several mortgage lenders for financing my new home and some have mentioned a bi-weekly payment option. Is there any benefit?
A. Yes, bi-weekly programs give you the ability to pay off your 30-year fixed mortgage in a shorter period of time. In essence, you are applying more to your principal balance each year, thereby paying your mortgage off faster. For convenience, the payments are automatically drafted from a designated account. Set up costs are minimal and in some cases will be paid by the lender. In the end, your compounded savings could be well over $100,000 depending on your loan amount.
Q. I’ve saved the minimum amount of money required to purchase a home. Should I wait until I have more money to put down before I begin the process?
A. Owning a property is no different from any other good investment, in that the longer you own it the more it is worth. When you buy the right house at the right price with the right financing, your personal finances improve every time you make a house payment. (You’re building equity and, since you continue to own the property, you have the opportunity to enjoy appreciation on it.) Owning a home is still one of the best ways of creating personal wealth and achieving financial security. Making monthly contributions to a savings account or other interest bearing account is optional, and many of us find an excuse to quit saving. Homeowners with mortgages however don’t have the option of not making their monthly payment. A mortgage creates a “forced savings vehicle” that makes people build their assets. As long as your monthly payments are manageable, waiting until you have a bigger down payment will not be particularly advantageous.